U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended January 31, 2000
--------------------------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from __________________ to ____________________
Commission file number 0-11485
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ACCELR8 TECHNOLOGY CORPORATION
------------------------------
(Exact name of small business issuer as specified in its charter)
COLORADO 84-1072256
----------------------------------- -------------------
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
303 East Seventeenth Avenue, Suite 108, Denver, Colorado 80203
--------------------------------------------------------------
(Address of principal executive office)
(303) 863-8088
--------------
(Issuer's telephone number)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
------- -------
Number of shares outstanding of the issuer's Common Stock:
Class Outstanding at January 31, 2000
----- -------------------------------
Common Stock, no par value 7,764,617
<PAGE>
Accelr8 Technology Corporation
INDEX
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Page
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - as of
January 31, 2000 and July 31, 1999 3
Statements of Operations
for the three months and six months ended
January 31, 2000 and July 31, 1999 4
Statements of Cash Flows
for the six months ended
January 31, 2000 and July 31, 1999 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 11
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
- -----------------------------
Accelr8 Technology Corporation
Balance Sheets
(Unaudited)
January 31, July 31,
2000 1999
------------ ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 10,561,774 $ 10,257,175
Accounts receivable, net 552,767 1,108,095
Prepaid expenses 106,095 58,023
Income taxes receivable 13,422 13,422
Deferred tax assets 336,496 221,452
------------ ------------
Total current assets 11,570,554 11,658,167
------------ ------------
PROPERTY AND EQUIPMENT:
Computer equipment 393,270 386,274
Furniture and fixtures 111,927 111,927
------------ ------------
Total property and equipment 505,197 498,201
Less accumulated depreciation (277,614) (239,964)
------------ ------------
Net property and equipment 227,583 258,237
------------ ------------
SOFTWARE DEVELOPMENT COSTS:
Software development cost less accumulated
amortization: 2000 - $2,164,216;
1999 - $1,762,216 1,460,887 1,638,086
------------ ------------
INVESTMENTS 806,659 453,053
------------ ------------
OTHER ASSETS 5,000 65,000
------------ ------------
Total assets $ 14,070,683 $ 14,072,543
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 312,951 $ 223,398
Accrued liabilities 65,102 61,422
Deferred revenue 148,750 140,000
Deferred maintenance revenue 172,911 265,883
------------ ------------
Total current liabilities 699,714 690,703
------------ ------------
LONG TERM LIABILITIES:
Deferred tax liabilities 560,940 627,823
------------ ------------
Other long-term liabilities 844,159 453,053
------------ ------------
Deferred license revenue 5,000 65,000
------------ ------------
SHAREHOLDERS' EQUITY
Common stock, no par value;
11,000,000 shares authorized;
7,794,617 shares issued and
7,764,617 shares outstanding 8,305,389 8,353,117
Contributed capital 315,049 315,049
Retained earnings 3,614,032 3,841,398
Shares held for employee benefit
(1,129,110 shares) (273,600) (273,600)
------------ ------------
Shareholders' equity 11,960,870 12,235,964
------------ ------------
TOTAL LIABILITIES AND EQUITY $ 14,070,683 $ 14,072,543
============ ============
3
<PAGE>
<TABLE>
<CAPTION>
Accelr8 Technology Corporation
Statements of Operations
(Unaudited)
Three Months Ended Six Months Ended
------------------ ----------------
January 31, January 31, January 31, January 31,
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Consulting fees $ 58,771 $ 7,989 $ 107,363 $ 91,850
Product license and customer support fees 274,989 653,045 619,221 1,211,982
Resale of software purchased 160,873 44,157 291,447 129,867
Provision for returns and allowances (11,800) -- (25,400) --
----------- ----------- ----------- -----------
Net Revenues 482,833 705,191 992,631 1,433,699
----------- ----------- ----------- -----------
Costs and Expenses:
Cost of services 303,370 243,539 635,553 498,725
Cost of software purchased for resale 42,041 2,720 79,804 6,270
General and administrative 584,069 297,410 900,717 523,647
Marketing and sales 180,159 281,978 414,706 550,059
----------- ----------- ----------- -----------
Total Expenses 1,109,639 825,647 2,030,780 1,578,701
----------- ----------- ----------- -----------
Income (loss) from operations (626,806) (120,456) (1,038,149) (145,002)
Investment income 434,996 202,378 628,856 329,730
----------- ----------- ----------- -----------
Income (loss) before income taxes (191,810) 81,922 (409,293) 184,728
Income tax (provision) benefit 104,169 (12,150) 181,927 (35,500)
----------- ----------- ----------- -----------
Net Income (Loss) $ (87,641) $ 69,772 $ (227,366) $ 149,228
=========== =========== =========== ===========
Weighted average shares outstanding - basic 7,764,617 7,823,117 7,777,715 7,836,503
=========== =========== =========== ===========
Net income (loss) per share - basic $ (.01) $ .01 $ (.03) $ .02
=========== =========== =========== ===========
Weighted average shares outstanding - diluted 7,764,617 8,121,253 7,777,715 8,079,763
=========== =========== =========== ===========
Net income (loss) per share - diluted $ (.01) $ .01 $ (.03) $ .02
=========== =========== =========== ===========
4
<PAGE>
Accelr8 Technology Corporation
Statements of Cash Flows
(Unaudited)
Six Months Ended
--------------------------------------
January 31, January 31,
2000 1999
------------ ------------
CASH FLOW FROM OPERATING ACTIVITIES:
Net income (loss) $ (227,366) $ 149,228
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 439,650 253,200
Deferred income tax provision (benefit) (181,927) --
Net change in assets and liabilities:
Accounts receivable 615,328 (64,847)
Prepaid expenses (48,072) 1,229
Income tax receivable -- 415,500
Accounts payable 89,553 (251,754)
Accrued liabilities 3,680 (129,892)
Deferred revenue (51,250) --
Deferred maintenance revenue (92,972) 73,027
Other long-term liabilities 391,106 109,701
------------ ------------
Net cash provided by operating activities 937,730 555,392
------------ ------------
CASH FLOW FROM INVESTING ACTIVITIES:
Software development costs (224,801) (611,536)
Purchase of property and equipment (6,996) (38,253)
Increase in investments (353,606) (72,201)
------------ ------------
Net cash used in investing activities (585,403) (721,990)
------------ ------------
CASH FLOW FROM FINANCING ACTIVITIES:
Net proceeds provided from sale
(purchase) of common stock (47,728) (105,163)
------------ ------------
Net increase (decrease) in cash and cash equivalents 304,599 (271,761)
Cash and cash equivalents, beginning of period 10,257,175 10,439,233
------------ ------------
Cash and cash equivalents, end of period $ 10,561,774 $ 10,167,472
============ ============
5
</TABLE>
<PAGE>
Accelr8 Technology Corporation
Notes to Financial Statements
For the six months ended January 31, 2000 and 1999
Note 1. Accounting Policies
The financial information provided herein was prepared from the books and
records of the Company without audit. The information furnished reflects all
normal recurring adjustments which, in the opinion of the Company, are necessary
for a fair statement of the balance sheets, statements of operations, and
statements of cash flows, as of the dates and for the periods presented. The
Notes to Financial Statements included in the Company's 1999 Annual Report on
Form 10-K should be read in conjunction with these financial statements.
Note 2. Software Revenue Recognition
Effective August 1, 1998 the Company adopted the provisions of the American
Institute of Certified Public Accountants (AICPA) Statement of Position (SOP)
97-2 "Software Revenue Recognition" SOP 97-2 has not changed the basic rules of
revenue recognition previously contained in SOP 91-1, but does provide
additional guidance, particularly with respect to multiple deliverables and
"when and if" available products. The effect of adopting SOP 97-2 was not
significant.
Note 3. Earnings Per Share
During February 1997, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards No. 128 "Earnings Per Share"
("SFAS 128"). SFAS 128 requires companies to present basic earnings per share
and diluted earnings per share, instead of the previously reported primary and
fully diluted earnings per share. The Company adopted this Statement in fiscal
year 1998 and all earnings per share have been restated to reflect the new
standard. The following table is a reconciliation of basic and diluted earnings
per share for the quarters and six months ended January 31, 2000 and 1999.
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
January 31, 2000 January 31, 1999
---------------------------------------- --------------------------------------
Income Shares Earnings Income Shares Earnings
(Numerator) (Denominator) Per Share (Numerator) (Denominator) Per Share
----------- ------------- --------- ----------- ------------- ---------
<S> <C> <C>
Net Income (loss) $(87,641) $69,772
Basic earnings per share:
Income (loss) available to
common shareholders (87,641) 7,764,617 $(.01) 69,772 7,823,117 $.01
====== ====
Effect of dilutive securities:
Stock options and warrants 298,136
-------- --------- ------- ---------
Diluted earnings
(loss) per share $(87,641) 7,764,617 $(.01) $69,772 8,121,253 $.01
======== ========= ====== ======= ========= ====
Six Months Ended Six Months Ended
January 31, 2000 January 31, 1999
---------------------------------------- --------------------------------------
Income Shares Earnings Income Shares Earnings
(Numerator) (Denominator) Per Share (Numerator) (Denominator) Per Share
Net Income (loss) $(227,366) $149,228
Basic earnings per share:
Income (loss) available to
common shareholders (227,366) 7,777,715 $(.03) 149,228 7,836,503 $.02
====== ====
Effect of dilutive securities:
Stock options and warrants 243,260
---------- --------- -------- ---------
Diluted earnings per share $(227,366) 7,777,715 $(.03) $149,228 8,079,763 $.02
========== ========= ====== ======== ========= ====
</TABLE>
Note 4. Repurchase of Common Stock
The board of directors has authorized the repurchase of shares of the
Company's common stock. At January 31, 2000 the Company had repurchased 94,000
shares of its common stock in open market purchases. In accordance with Colorado
State law, the Company's repurchases of shares of common stock shall constitute
authorized but unissued shares.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
- --------------------------------------------------------------------------------
Information contained in the following discussion of results of operations
and financial condition of the Company contains forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995,
which can be identified by the use of words such as "may," "will," "expect,"
"anticipate," "estimate," or "continue," or variations thereon or comparable
terminology. In addition, all statements other than statements of historical
facts that address activities, events, or developments that the Company expects,
believes, or anticipates will or may occur in the future, and other such
matters, are forward-looking statements. The following discussion should be read
in conjunction with the Company's financial statements and related notes
included elsewhere herein. The Company's future operating results may be
affected by various trends and factors which are beyond the Company's control.
These include, among other factors, general public perception of Year 2000
issues and solutions, and other uncertain business conditions that may affect
the Company's business. The Company cautions the reader that a number of
important factors discussed herein, and in other reports filed with the
Securities and Exchange Commission, could affect the Company's actual results
and cause actual results to differ materially from those discussed in
forward-looking statements.
Changes in Results of Operations: Six months ended January 31, 2000 compared to
six months ended January 31, 1999
Net revenues for the six months ended January 31, 2000, were $992,631 after
a provision of $25,400 or 2.6% of net revenues for possible returns and
allowances, a decrease of $441,068 or 30.8% as compared to the six months ended
January 31, 1999. Consulting fees for the six months ended January 31, 2000,
were $107,363 an increase of $15,513 or 16.9% as compared to the six months
ended January 31, 1999, and represented 10.8% of net revenues. Product license
and customer support fees for the six months ended January 31, 2000, were
$619,221 a decrease of $592,761 or 48.9% as compared to the six months ended
January 31, 1999, and represented 62.4% of net revenues. Revenues from the
resale of purchased software for the six months ended January 31, 2000, were
$291,447 an increase of $161,580 or 124.4% as compared to the six months ended
January 31, 1999, and represented 29.4% of net revenues. This decrease in
revenue is primarily due to the lack of Year 2000 tool sales, declining Y2K
factory royalties and declining sales of related services, which management
believes occurred because many companies had already purchased the tools
necessary to help remediate any Year 2000 problems. In addition, management
believes that, revenues from the sale of migration tools and services were
negatively impacted by a "lockdown" of most Information Technology environments
in preparation for Year 2000 change over of software applications. Also, the
previous period included a substantial one-time maintenance income item related
to a Year 2000 license.
During the six months ended January 31, 2000, sales to the Company's
largest customer was $129,663 representing 13.1% of the Company's revenues. In
comparison, sales to the Company's largest customer was $424,103 representing
29.6% of net revenues for the six months ended January 31, 1999. The loss of a
major customer could have a significant impact on the Company's financial
performance in any given year.
7
<PAGE>
Cost of services for the six months ended January 31, 2000, was $635,553 an
increase of 136,828 or 27.4% as compared to the six months ended January 31,
1999. Cost of services as a percentage of revenues from both consulting fees and
product license and customer support fees increased from 38.3% for the six
months ended January 31, 1999, to 87.5% for the six months ended January 31,
2000 The increase occurred mainly because of decreased revenue plus increased
amortization of software costs capitalized.
Cost of software purchased for resale for the six months ended January 31,
2000, was $$79,804 an increase of $73,534 or 1173% as compared to the six months
ended January 31, 1999. The increase in software purchased for resale results
from increased revenue from resale of purchased software, variations in the
product mix of items sold, and a reduction of cost in the previous period due to
accumulated overcharges in the past.
General and administrative expenses for the six months ended January 31,
2000, were $900,717 an increase of $377,070 or 72.0% as compared to the six
months ended January 31, 1999 primarily due to additional salary charges that
resulted from an increase in investment income from marketable securities in the
Company's deferred compensation trust, and increased professional fees as a
result of the action by the Securities and Exchange Commission.
Marketing and sales expenses for the six months ended January 31, 2000,
were $414,706 a decrease of $135,353 or 24.6% as compared to the six months
ended January 31, 1999. This decrease was due to decreased costs of personnel
and related employee costs, advertising, promotional material, and trade shows
that were related to the Company's Year 2000 tools and services in the prior
period partially offset by an increase in commissions paid to an independent
company.
Investment income for the six months ended January 31, 2000, was $628,856
an increase of $299,126 as compared to the six months ended January 31, 1999.
This increase resulted largely from increased value of marketable securities
held in the deferred compensation trust.
Income tax benefit for the six month period ended January 31, 2000 was
181,927 as compared to an expense of $35,500 for the six months ended January
31, 1999. This decrease resulted from incurring a loss in the current quarter
which will allow a refund of income taxes previously paid plus additional tax
credits.
As a result of these factors, net loss for the six months ended January 31,
2000, was $227,366 a decrease of $376,594 or 252% as compared to the six months
ended January 31, 1999.
Capital Resources and Liquidity
At January 31, 2000, as compared to at July 31, 1999, the Company's current
assets decreased .8% from 11,658,167 to $11,570,554 and the Company's liquidity,
as measured by cash and cash equivalents, increased by 3.0% from $10,257,175 to
$10,561,774. During the same period, shareholders' equity decreased from
$12,235,964 to $11,960,870 as a result of a net loss plus cost of repurchasing
company stock in the amount of $47,728 during the six months ended January 31,
2000.
The Company has historically funded its operations primarily through equity
financing and cash flow generated from operations. The Company anticipates that
current cash balances and working capital plus future positive cash flow from
operations will be sufficient to fund its capital and liquidity needs in the
foreseeable future.
8
<PAGE>
Changes in Results of Operations: Three months ended January 31, 2000 compared
to three months ended January 31, 1999
Net revenues for the three months ended January 31, 2000 were $482,833
after a provision of $11,800 or 2.6% of net revenues for possible returns and
allowances, a decrease of $222,358 or 31.5% as compared to the three months
ended January 31, 1999. Consulting fees for the three months ended January 31,
2000, were $58,771 an increase of $50,782 or 636% as compared to the three
months ended January 31, 1999, and represented 12.2% of net revenues. Product
license and customer support fees for the three months ended January 31, 2000,
were $274,989 a decrease of 378,056 or 57.9% as compared to the three months
ended January 31, 1999, and represented 57.0% of net revenue. Revenues from
the resale of purchased software for the three months ended January 31, 2000,
were $160,873 an increase of 116,716 or 264% as compared to the three months
ended January 31, 1999, and represented 33.3% of net revenue. This decrease in
revenue is primarily due to the lack of Year 2000 tool sales, declining Y2K
factory royalties and declining sales of related services, which management
believes occurred because many companies had already purchased the tools
necessary to help remediate any Year 2000 problems. In addition, management
believes that, revenues from the sale of migration tools and services were
negatively impacted by a "lockdown" of most Information Technology environments
in preparation for Year 2000 change over of software applications. Also, the
previous period included a substantial one-time maintenance income item related
to a Year 2000 license.
During the three months ended January 31, 2000, sales to the Company's
two largest customers were $94,450 and $48,868 representing 19.6% and 10.1% of
the Company's revenues, respectively. In comparison, sales to the Company's
largest customers were $401,115 and $135,300 representing 56.9% and 19.2% of
total revenues for the three months ended January 31, 1999. The loss of a major
customer could have a significant impact on the Company's financial performance
in any given year.
Cost of services for the three months ended January 31, 2000, was $303,370
an increase of $59,831 or 24.6% as compared to the three months ended January
31, 1999. Cost of services as a percentage of revenues from both consulting fees
and product license and customer support fees increased from 36.8% for the three
months ended January 31, 1999 to 90.9% for the three months ended January 31,
2000. This increase is the result of significantly reduced sales while cost of
services increased due to increased amortization of capitalized software costs
and rent, offset by decreased salaries.
Cost of software purchased for resale for the three months ended January
31, 2000, was $42,041 an increase of $39,321 or 1446% as compared to the three
months ended January 31, 1999. The increase in software purchased for resale
results from increased revenue from resale of purchase software, variations in
the product mix of items sold, and a reduction of cost in the previous period
due to accumulated overcharges in the past.
General and administrative expenses for the three months ended January 31,
2000, were $584,069 an increase of $286,659 or 96.4% as compared to the three
months ended January 31, 1999, primarily due to additional salary charges that
resulted from an increase in investment income from marketable securities in the
Company's deferred compensation trust, and increased professional fees as a
result of the action by the Securities and Exchange Commission.
9
<PAGE>
Marketing and sales expenses for the three months ended January 31, 2000,
were $180,159 a decrease of $101,819 or 36.1% as compared to the three months
ended January 31, 1999. This decrease was due to decreased costs of personnel
and related employee costs, advertising, promotional material, and trade shows
that were related to the Company's Year 2000 tools and services in the prior
period partially offset by an increase in commissions paid to an independent
company.
Investment income for the three months ended January 31, 2000, was $434,996
an increase of $232,618 as compared to the three months ended January 31, 1999.
This increase resulted largely from increased value of marketable securities
held in the deferred compensation trust.
Income tax benefit for the three month period ended January 31, 2000 was
$104,169 as compared to an expense of $12,150 for the quarter ended January 31,
1999. This decrease resulted from incurring a loss in the current quarter which
will allow a refund of income taxes previously paid plus additional tax credits.
As a result of these factors, net loss for the three months ended January
31, 2000, was $87,641 a decrease of $157,413 or 226% as compared to the three
months ended January 31, 1999.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
- ----------------------------------------
a) Exhibits: There are no exhibits for the six months ended January 31, 2000.
b) Reports on Form 8-K:
The Company filed a report on Form 8-K on November 30, 1999, relating to
"Changes in Registrant's Certifying Accountant" as a result of the resignation
of its auditor Deloitte Touche LLC, and an amendment to that Form 8-K on
December 9, 1999. There were no other Form 8-K's filed during the quarter ended
January 31, 2000.
10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date:
-----------------------
ACCELR8 TECHNOLOGY CORPORATION
/s/ Thomas V. Geimer
---------------------------------------------
Thomas V. Geimer, Principal Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> JUL-31-1999 JUL-31-1998
<PERIOD-END> JAN-31-2000 JAN-31-1999
<CASH> 10,561,774 0
<SECURITIES> 0 0
<RECEIVABLES> 566,189 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 11,570,554 0
<PP&E> 505,197 0
<DEPRECIATION> 277,614 0
<TOTAL-ASSETS> 14,070,683 0
<CURRENT-LIABILITIES> 699,714 0
<BONDS> 1,410,099 0
0 0
0 0
<COMMON> 8,305,389 0
<OTHER-SE> 3,655,481 0
<TOTAL-LIABILITY-AND-EQUITY> 14,070,683 0
<SALES> 0 0
<TOTAL-REVENUES> 992,631 1,433,699
<CGS> 0 0
<TOTAL-COSTS> 2,030,780 1,578,701
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (628,856) (329,730)
<INCOME-PRETAX> (409,293) 184,728
<INCOME-TAX> (181,927) 35,500
<INCOME-CONTINUING> (227,366) 149,228
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (227,366) 149,228
<EPS-BASIC> (.03) .02
<EPS-DILUTED> (.03) .02
</TABLE>
